Actually, I think we are in for high prices from both companies. AMD sitting back and letting nVidia establish higher prices could have it's benefit to AMD on their next gen pricing. I don't see them trying to undercut the market again.
Assuming the rumors we've heard happen:
Volcanic Isl. @ 4096sp + 512bit mem bus + 8gig VRAM = $1000 at least.
Perhaps, but I believe that if AMD were to produce larger chips to bring back some competition at the high end, it would still benefit the consumer in terms of pricing. Sure, AMD could take advantage of the inflated pricing and position their next-gen product stack at the same level as nVidia's, but so long as nVidia has a reputation and branding advantage, AMD will most likely charge less than a comparably spec'd nVidia card. In other words, if the GTX 780 is indeed going to be released at $650, AMD's offering would most likely be somewhere between $600-$630. Sure, it's still more expensive than what we are used to, but hey, if I can get GTX 780 level of performance for less than 780 pricing, by all means I will consider AMD's equivalent. Having the option between the two is better than not having it.
Of course, this depends on whether or not AMD releases something worthwhile. If there isn't competition to begin with, prices will be worse off across the board.
Those specs would be amazing, however. I hope AMD splits their high-end line-up like nVidia did this generation and put more focus on producing a gaming oriented chip. I doubt AMD will ever be a big player in the HPC market, so perhaps it's best if AMD sticks with producing only gaming oriented chips.